Stricker controls on Mozambicans entering Mpumalanga's capital may have a detrimental effect on the residential property market.

The Cape commercial property market is starting to follow the residential property market by using the auction mechanism as a first choice method of sale, says Auction Alliance CEO Rael Levitt.

The Bureau for Economic Research has released its building survey results for the second quarter. According to the Building Cost Index, the increase in building costs is slowing, but the bureau forecasts that building costs will probably rise later this year by 8 percent.

The survey shows business confidence among contractors in the residential sector is waning.
Building activity levels in the non-residential sector remain unfavourable and new work is scarce. Although the lowering in interest rates should underpin activity levels for the next year, a real revival is only expected in the new year once overall
economic activity shows clear signs of acceleration.

BUSINESS conditions in the building sector have deteriorated in the second quarter as high interest rates take a bite out of residential property demand, a survey from the University of Stellenbosch's Bureau of Economic Research shows. 

The bureau's business confidence index for the building industry slipped to 54 last quarter from 58 in the first quarter as economic growth slowed. The delayed effect of last year's four interest rate hikes "have now left a mark on the industry", the bureau said.

Residential property was worst hit by the high interest rates and a slowdown in gross domestic product growth, with building contractors' profit margins coming under pressure in the second quarter, resulting in job losses. 

Domestic demand has been fairly resilient in the first quarter, with the construction sector benefiting from capital expenditure projects in both the public and private sector, according to last month's Reserve Bank quarterly bulletin.

However, the survey results signal much weaker conditions in the second quarter.

"Growth is slowing down in the building sector, which has hurt business confidence. Retrenchments have increased, especially in the residential sector, as business conditions have deteriorated," said the bureau's senior economist Charles Martin.

Civil engineers, typically involved in large government infrastructural projects, experienced far better business activity in the second quarter compared to other sectors of the construction sector.

Civil engineering firms said competition for tenders was intense and profit margins were under pressure, according to the bureau.

"The majority of contractors polled expect the market to weaken somewhat in the third quarter," said Martin. A lower interest rate this year was likely to boost the industry's prospects, but this would materialise only next year.

"Conditions are weaker, but this is not a recession. We will see a gradual pick-up in business confidence by the fourth quarter, but a full turnaround is only likely next year," said Martin.

The confidence index has a tendency to lead the official building figures released by Statistics SA by at least two quarters.

Stats SA's April release of building figures shows an 8,4% year on year drop in actual building plans passed, with less building plans passed in Gauteng, Eastern Cape, Mpumalanga and Northern Cape this year compared to last year.

The real value of buildings completed in April increased by 2,7% year on year, mainly due to a sharp rise in non residential buildings, according to Stats SA's figures.

The survey shows building costs have remained high, despite the strong rand reducing the price of imported inputs.

However, costs are likely to moderate during the year, with the bureau forecasting building costs to grow 8% this year.      

It is extremely rare that nearly an entire office development in the heart of Bellville is up for sale by public auction says Johathan Smiedt of ClareMart Auctioneers.

The city of Johannesburg has proposed tariff increases of an average 13% in the budget tabled by mayor Amos Masondo.

Commercial properties are a completely different animal from residential properties in regards to assessing value.

Auction sales of commercial and industrial property in Gauteng are following international trends, according to Auction Alliance Chief Executive Rael Levitt.

The Coega Development Corporation (CDC) has lifted a rare butterfly, endemic to the area around the multi-billion dollar development, from ecological obscurity and turned it into the star of a series of television advertisements.

Nedbank Property Finance is tackling untapped segments of the property development market in the light of the oversupply in popular commercial sectors.